The Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill passed its third reading with the goal of driving New Zealand’s push toward carbon neutrality by 2050.
In a statement, Commerce and Consumer Affairs Minister David Clark and Climate Change Minister James Shaw said the bill was one of several actions New Zealand’s government is taking to meet its international obligations in achieving the carbon neutrality goal as required by the Climate Change Response Act 2002.
The bill would require roughly 200 financial market participants to clearly disclose the risks and opportunities climate change presents their business.
The new rules would apply to the largest financial firms in New Zealand, including banks, credit unions, and building societies with total assets of more than NZ$1 billion ($718.90 million), managers of registered investment schemes with more than NZ$1 billion in total assets under management, and licensed insurers with more than NZ$1 billion in total assets or annual premium income greater than NZ$250 million ($180 million), according to the Ministry for the Environment.
It would also apply to equity and debt issuers listed on the New Zealand stock exchange and Crown financial institutions with greater than NZ$1 billion in total assets under management, noting that the thresholds would be increased from time to time to reflect the movements in the consumer price index.
Currently, the majority of large New Zealand entities provide limited or no information on what climate change might mean to them, or are reporting in inconsistent ways, the ministry said.
The law will require disclosures for financial years beginning in 2023, subject to the publication of climate standards from New Zealand’s independent accounting standard setter, the External Reporting Board (XRB).
The XRB’s climate standards will be based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) on Governance, Risk Management, Strategy, and Metrics and Targets, which are widely acknowledged as international best practice.
Both the Commerce and Consumer Affairs Minister said in a statement on Oct. 21 that the new law will promote business certainty, raise expectations, and accelerate progress to create a “level playing field.”
“Climate-related disclosures will bring climate risks and resilience into the heart of financial and business decision making. It will encourage entities to become more sustainable by factoring the short, medium, and long-term effects of climate change into their business decisions,” Shaw said.
“New Zealand is a world-leader in this area and the first country in the world to introduce mandatory climate-related reporting for the financial sector. We have an opportunity to pave the way for other countries to make climate-related disclosures mandatory,” he added.